"8 Million Strong and Voting!" Small business is the heart beat of the United States economy. This blog searches for issues and answers to helping small business survive and thrive in California and the United States.

Tuesday, December 27, 2011

Last week, Lori Kammerer and I talked to Cal OSHA Director, Ellen Widess and three members of her staff to discuss how Small Business California can work more closely with her agency. We were impressed with her desire to reach out to small business and find ways that they can assist small business in navigating the regulations of the agency. I came away with the belief she wants to be helpful and a resource to us.

The first topic we discussed is the crazy ruling that businesses are not required to have an emergency action plan [disaster plan] and a fire prevention plan but if they do it must conform with Cal OSHA guidelines or the business will be subject to fines. Ms. Widess assured us that auditors are not fining businesses for this unless they have serious health hazards.I agreed to obtain a few disaster plans from small businesses around the state so that her people could review them. I would appreciate your sending me a copy of your plan that I can forward to her. Please be advised I will not send the name of your company or your name.

The next step will be the establishment of a task force of small business people and Cal OSHA people to develop a simple prototype for small businesses of an emergency action plan and fire prevention plan. I think you all will agree that this makes sense for any business but it must be simple and easy to explain to our employees. If you are interested in participating on this task force please let me know. I will send out the final draft when completed.

The next issue we discussed was a new etool to assist small businesses in developing an Injury and Illness Prevention plan. I am always amazed that small businesses are not aware that this is required of all employers. I would guess over half of the people receiving this email either do not know this or have not developed a plan. This is the number one citation that Cal OSHA imposes when they do an audit and can mean a fine of as much as $5000.Please take a look at the etool link provide below Ms. Widess would be interested to know your thoughts on this link. Please advise.

http://www.dir.ca.gov/dosh/etools/09-031/index.htm

Lastly, I would like to know of problems you have had with Cal OSHA or regulations that are put on your business that you feel do not make sense or could be streamlined. Small Business California looks forward to working with Ms. Weidess and Cal OSHA and all of you now have a resource to express your thoughts about the agency.

Tuesday, December 20, 2011

Please see below the new charges on workers compensation policies renewing January 1, 2011. (click to enlarge). You will note they have gone down and saves about $113 million for busineses in California. Small Business California wants to thank the Brown Administration for these reductions with a special thanks to Labor Secretary Marty Morgenstern and our good friend DIR Director Christine Baker.

Small Business California needs to raise more money in 2012 for our organization. I hope you all see the benefits of the email messages you receive and our Advocacy work. There is a cost as we have a government relations person in Sacramento. I try to pick up much of the cost through my company and our entire board does not receive any remuneration, but there are still cost that must be paid to keep the organization running. Please seriously consider joining. The cost I think is relatively small considering the value you receive.

If the dues of $150 for businesses with less than $1 million and $300 for businesses with over $1 million are too much for you at this point please consider making a contribution of any amount. You can join or contribute on line at www.smallbusinesscalifornia.org. We do take credit cards. Thank you again for those of you that are members.

Friday, December 16, 2011

Small Business California worked hard to get SBA Administrator, Karen Mills to name a person in District 9 [California, Arizona, Nevada, Hawaii and Guam] as the point person in the implementation of the 2007 Energy Act. This bill required the SBA to take the lead in helping small businesses cost effectively reduce their Energy use with part of that being On Bill Financing, which Small Business California brought to California. Elizabeth Echols, the Regional Administrator has been designated as that person and now holds the title of Senior Advisor to the Administrator on Clean Tech and Energy Efficiency initiatives.

This week, Hank Ryan and I have talked to Ms. Echols and District Director, Mark Quinn about how we can move forward. Ms. Echols and Mr. Quinn seemed very interested in moving forward on this, especially given the President's Better Building program. One possibility is implementing On Bill Financing with the 504 loan program and also trying to find ways of working with 7A. This will be an ongoing effort but we are now beginning to move forward.

On the SBIR front, the bill to reauthorize the program has now been passed in the Senate and will go to the President where we expect a signature. This shows what small businesses can accomplish when we work together across the country. Part of what made this happen is that small businesses, both inside and outside the program, spoke up with a unified voice. See below for Rich Scindell’s piece. It’s a little long but well worth reading.

I am pleased (a gross understatement) to inform you that SBIR HAS NOW BEEN REAUTHORIZED for a period of 6 years, ending September 30, 2017, and that includes STTR, and what was the Commercialization Pilot Program (CPP), now to be known as the Commercialization Readiness Program (CRP). This was all done under the National Defense Authorization Act of 2012 (NDAA) HR.1540. All that's left is for the President to sign the bill into law, and he has said he would.

There are many changes and additions to these programs, many you will probably like, some, perhaps "not so much. What you won't read in press releases or the main stream press is that the SBIR program was a stone's throw from being laid to rest. The fatigue factor from several years of battling for reauthorization, and fighting for 14 continuing resolutions led some powerful forces to question the validity of a program that can't be reauthorized. "If it can't be passed, let it die" was the word from one source. And die it would, had there not been serious compromises.

Although reauthorization has passed, your role is not done. It is vital that our SBIR community stay "tuned in" and active because your input will be requested relating to the changes and how the program is working for you. Although we have a six year reauthorization, I can assure you that some SBIR issues will be revisited by congress during this period.

Rather than giving you a laundry list of changes, we are in the process of creating a detailed technical document explaining the new legislation (sans legalese) and how it will most likely effect small business, the agencies, and academia. That will be in our next issue.

The legislation gives the SBA 180 days to implement new policy directives for SBIR and STTR. As those are being developed, public comments will be solicited. We'll let you know about those when they happen. Your input will be critical! The new eligibility regulations must implemented within 120 days. For those of you who want the bill's language, we have created a PDF of the SBIR legislation from the conference report that was passed. It is 107 pages from the 1844 page NDAA document. You'll find it at www.zyn.com/sbir/insider/SBIR_Pages_from-HR1540conf.pdf

At this point you have "certainty" that the SBIR/STTR programs will continue, but uncertainty as to how the agencies will handle the changes (even the agencies will need to get up to speed on the details). On the other hand there may very well be another CR if congress is unable to pass the omnibus appropriations bill before they go home for the holidays. The CR would be to keep the agencies funded for a short period (having nothing directly to do with SBIR authorization).

The Real Story of SBIR Reauthorization Regardless of what you may see in the press about people taking credit for SBIR reauthorization, one person, Senator Mary Landrieu (D-LA), chair of the Senate Committee on Small Business & Entrepreneurship, towers over all others. I guarantee you that without Senator Landrieu and her extraordinary efforts in this political climate, SBIR would not have survived.

Jere Glover, SBTC executive director, who has been a keystone in SBIR since its inception and has been an important participant in every SBIR reauthorization, stated : "There has never been a Senator that has done more for the SBIR community, and spent more personal time and personal involvement than Senator Landrieu." On the reauthorization process Glover stated "SBIR reauthorization has always been tough, but never like this."

Landrieu worked closely with her committee's ranking member Olympia Snowe (R-ME), who has been an important supporter of SBIR since the beginning, and several others also played important supporting roles. On the Senate Armed Services Committee, Senators Carl Levin (D-MI), and John McCain (R-AZ) made it possible to include SBIR reauthorization language in the National Defense Authorization Act of 2012.

In fact, this morning shortly before passage of the NDAA, Senator Levin stated: "The conference report includes Senator Landieu's bill to extend the small business [innovation] research, the SBIR program for an additional six years. It's been about six years since we reauthorized this vitally important program which provides a huge benefit to our small businesses so that they can effectively participate in research programs that are funded by the federal government. In the defense arena, SBIR has successfully invested in innovate research and technologies that have contributed significantly to the expansion of the defense industrial base in the development of new military capabilities."

On the House side, we have Buck McKeon (R-CA) chair of the House Armed Services Committee (HASC), and ranking member Adam Smith (D-WA) to thank. But they needed persuasion and support to do this, and that came from a dedicated SBIR champion, Congresswoman Niki Tsongas (D-MA) who worked hard to get a lot of congressionals and the House leadership on board to support the Senate's bill over the House's (not an easy or politically popular feat). Traditionally there's not a lot of "love" between House and Senate.

HASC may not have been able to include SBIR without the support that Congresswoman Tsongas was able obtain. She is a true SBIR champion, and is very considerate of her constituents, as well as grateful for the support that many of you gave to signing on to the SBTC's SBIR letter to congressional leadership. That made a huge difference! In a conversation with Ms. Tsongas, I thanked her for all her hard work and dedication to the SBIR program. She said, "Rick, it took a village."

Villages can be quaint but they can also be troublesome. On the Senate side, Landrieu had things under control, but on the House side she ran into some,,, lets say trolls and grouches. SBIR reauthorization was always problematic in the House due to some of the trolls in the form of House Small Business Committee chair Sam Graves (R-MO) and ranking member Nydia Velazquez (D-NY), and the grouch in the form of House Science Committee chair Ralph Hall (R-TX). They tried to block SBIR inclusion in the NDAA and it was looking bleak for SBIR.

This behavior has been going on for years, and the trolls continued to block SBIR from being reauthorized (unless it was their way). Ms. Landrieu, in what may have been a Howard Beale moment, was mad as hell and wasn't going to take it anymore, went over to the House, and had a talk with these people face-to-face, allegedly in a language they could understand (terminology by Harry Truman).

That, along with your efforts, and those of some other groups in contacting the leadership and other congressionals, helped sway things in a manner we have not seen in the SBIR world. Velazquez backed off, and Graves & Hall finalized a compromise with Landrieu that the Senate and House could live with. Both House & Senate leadership played an important role in getting this done.

In the next issue we will have detailed analysis of the changes to the program and we'll let you know who all the hero's were to help make this possible. There are lots!

Of course none of this would be possible without staff, and one staffer stands out from all the rest. Nobody, be it government or private sector has been more dedicated to SBIR, or has fought harder or longer for you and small businesses, than Ms. Kevin Wheeler. Kevin has been a warrior, and has often times been vilified because she wouldn't cave in to the ridiculous demands of high rolling, high pressure lobbyists, or the House Small Biz and S&T staffers doing their bidding. They did not appreciate Ms. Wheeler's protecting the interests of small business. That's all for now and we can get some rest. Congratulations and thanks to all of you who helped make this happen!

Here's wishing you a Merry Christmas, Happy Chanukah, Kwanzaa, Yontif, Festivus and Gafe Gake. We'll be back before the New Year.

Wednesday, December 14, 2011

Thank you to all of you that signed onto the letter for SBIR. It made a difference. There were over 1,000 signatures and small business organizations around the country including Small Business California made it happen. A special thanks to our own Jackie Speier for her support and Congresswoman Nancy Pelosi with Nydia Velazquez and her work with Senate Small Business Committee Chair Landrieu.It is not a done deal yet but we are close.

FYI To my knowledge Small Business California working with the National Small Business Association was the only statewide California organization that worked on this. See below

As you know, we made the window to get a deal submitted for inclusion in the National Defense Authorization Act conference. We filed the deal on Saturday but were asked by SASC to stay silent until it was officially locked down with signatures and SASC and HASC had a chance to make their own statements Tuesday. Obviously, we wanted to respect that because we’d be nowhere without their help.

It was a crazy week getting the deal filed on Saturday, literally down to the wire. And Senator Landrieu’s success in getting a deal was mostly due to the work from the groups and businesses and members who put together letters, met with members and their staff, made concessions in reaching a compromise, and had the courage to go public with opposition to controversial provisions. So many deserve credit for getting us this far. Thank you.

There are many members who helped get us to this point, but I really think Landrieu earned the most credit. She got out there early on NDAA and got one of only about eight votes (out of about 375 amdts filed), and she worked the phones and knocked on House doors to keep NDAA in the bill and reach a deal with Graves and Hall. More specifically, she went to the House side Tuesday, Wednesday and Thursday of last week to meet with key members (Ms. Johnson, Mr. Graves and Mr. Hall), and she had calls with Mr. Levin, Mr. McCain, Mr. Smith, Ms. Pelosi, etc.

Among the highlights, Landrieu was able to negotiate for six years, more than the four or five expected, and she was able to get more in allocation than was expected (SBIR to 3.2% and STTR to .45% instead of 3% and nothing for STTR). The House also moderated some of their more controversial provisions (this was due to the group work and letters). I’m happy to do a call with you all if that would help to talk about the provisions in more detail.

Until then, we wait for the votes in the House and the Senate and keep our fingers crossed that there is no veto. As of now, the House is expected to vote on National Defense Conference Report around 3:30pm. The Senate is trying to get agreement to have its vote today.

This is really good news for SF small businesses. Legislation would be required to be reviewed by Small Business Commission where the legislation impacts jobs. We will need all your help getting this to the ballot and getting this passed in June. Please see press release below.

San Francisco, CA—Mayor Edwin M. Lee today introduced a proposed Charter Amendment to require further analysis of all legislation introduced at the Board of Supervisors that may result in a net job loss.

The Charter amendment builds upon Proposition I in 2004 that created the City’s Office of Economic Analysis to review economic impacts from policies being considered by the City. By proposing this Charter amendment, Mayor Lee is strengthening job protections and fostering economic growth.

“I firmly believe that it is City Hall’s responsibility to help small businesses grow and promote job growth in the private sector,” said Mayor Lee. “If approved by voters in June, this Charter amendment will require a special Jobs Impact Review hearing for any new legislation that the impartial City Economist determines could negatively affect jobs. By including the voices of business owners and employees and evaluating impacts and alternatives to job loss in the City, we are improving transparency and accountability in our lawmaking process.”

The proposed amendment would require the Controller’s Office to report on all legislation introduced at the Board of Supervisors that imposes obligations or limitations on private businesses or their operations that may result in a net job loss. It would prohibit the Board of Supervisors from taking final action on ordinances introduced when the Controller’s Office has made this determination and refers the legislation to the Small Business Commission for further consideration and possible development of alternative policy proposals.

Monday, December 12, 2011

In a previous email I mentioned that our good friend, Christine Baker had been appointed by the Governor as Acting Director of the Department of Industrial Relations. On Friday, the Governor replaced the Acting to the Director. She will now have to go through confirmation hearings. We have worked closely with Christine when she was head of the California Health Safety and Workers Compensation Commission. Christine is a great friend of Small Business California and we look forward to working with you Christine. She has committed to working on the underground economy which is a big issue for many small business.

See article below in LA Times by Marc Lifsher on the underground economy. Last week I testified at Mark DeSaulniers Select Committee on the Underground Economy and spoke on NPR "Air Talk with Larry Mantle"

(link to radio talk below):
http://www.scpr.org/programs/airtalk/2011/12/09/21716/ca-underground-economy/

This will be a big issue for Small Business California in the coming year. I am now in the process of identifying small businesses around the state that will speak to the media and tell their story. Please let me know if you are interested in doing so. Please be sure to give me your business name and location.

(California officials vow to crack down on underground economy):
http://www.latimes.com/business/la-fi-underground-economy-20111209,0,6550311.story

If you find these emails helpful and are not a member please join Small Business California. You can do so by going to www.smallbusinesscalifornia.com We need you to join so that we can continue to represent you in Sacramento and Washington.

Thursday, December 08, 2011

Yesterday, Small Business California Board member Lee Petillon , Lori Kammerer, our Government Relations person, and I met with Senator Price’s staff and representatives of the Consumer Attorneys of California regarding putting forth legislation that would help small businesses obtain capital.

Currently, the issuer of a private investment must have a pre-existing personal relationship with each prospective investor. This may be supplied by a registered broker dealer acting as the issuer’s agent. Small businesses do not have these contacts. They also do not have the size or track record to attract a registered broker dealer to arrange the offering. Thus, they are effectively prevented from legitimately raising any equity capital. This affects all small businesses but is particularly acute with minority and women owned businesses.

Our proposed legislation would provide for an exemption for issuer’s of these investments if the investors are accredited investors. This is defined as those with a new worth of $1 or individual incomes of $250,000 for individuals or $300,000 for households. We believe this would address the issue of access to capital for many small businesses. Clearly under current conditions banks, VCs, angel capital, etc are not meeting the needs of small businesses looking for $100,000 to $1 million.

This legislation will not be easy to pass should it get introduced. We will need your help. Will you help us get this passed? If you are a member of an association will your association help? We need to start getting our support in place. If you have questions let me know.

Monday, December 05, 2011

I rarely send out emails on something so specific and I know most of you are not SBIR (Small Business Innovation Research) recipients, but to the small business SBIR community this is really important. Small Business California asked you to support your small business colleagues around the country and sign on to support this legislation.See below. Small Business California has signed on and I have individually.

There is something important going on right now that we believe you should consider acting on. Although many of you write to us asking what you should do, we refrain from making suggestions because our job is to help you be well informed about the SBIR landscape so you can make your own decisions as to what you feel is appropriate. We are going to make an exception in this issue, and tell you what we would do if in your shoes, then explain why. This has to happen before close of business Tuesday, December 6, 2011.

Brief Background The Senate and House have now passed their own versions of the huge National Defense Authorization Act for Fiscal Year 2012 (NDAA).

Senate version is at: http://www.gpo.gov/fdsys/pkg/BILLS-112s1867es/pdf/BILLS-112s1867es.pdf House version is at: http://www.gpo.gov/fdsys/pkg/BILLS-112hr1540eh/pdf/BILLS-112hr1540eh.pdf

Included in the Senate version of NDAA is the complete reauthorization of SBIR/STTR/CPP, from the language of the Senate's earlier SBIR compromise bill S.493. Amongst other improvements discussed many times (see past SBIR Insiders at www.zyn.com/sbir/insider ) this extends the program through September 30, 2018.

The Senate & House will meet this week in what's known as "conference" to work out the differences in the two NDAA bills. The House is more than squeamish about including the Senate's SBIR language in the NDAA, and certain powers that be in the House are working to strike the SBIR language as we speak. They will most certainly accomplish this unless we, as individuals and collectively as a community of businesses try to intervene.

What's Being Done Right Now The Small Business Technology Council (SBTC) is rallying its members to sign on to a letter they have composed for the House & Senate leadership, urging them to keep the SBIR language in the NDAA (full text of the letter at the end of this article and at www.zyn.com/sbir/insider/SBIR_Reauthorization_Letter_to_Leadership_12-2011.pdf ).

What You Can Do This is your opportunity to be a strong voice and sign on to this letter. You do NOT have to be a member of SBTC, nor is anyone asking you for funds. Here's all you need to do: Send an email to alec@sbtc.org with your name, your company name, and your company address/location.

Tell SBTC it is to be used only in support of their letter to the House & Senate Leadership (as shown in the 12-04-11 Issue of the SBIR Insider) concerning the adoption of the Senate's SBIR reauthorization language (Division E–SBIR and STTR Reauthorization) in the Senate's version of the NDAA (S. 1867). Your email must be received by Alec at SBTC by close of business Tuesday, December 6, 2011. Feel free to copy us on the email (rick@zyn.com) if you'd like.

Why SBTC? As you know, we cover most of the mainstream SBIR support efforts from various groups, and this action has nothing to do with joining or funding any organization. The Small Business Technology Council (SBTC) is the oldest and most established voice dedicated to SBIR. Their executive director, Jere Glover (one of the SBIR founders) is the best known and most respected SBIR advocate on the Hill, and he is leading this effort to allow all SBIR supporters to sign on to this letter. This does not diminish the other organizations trying to do their part, but your support on this letter is very important.

The Inside Skinny

Powerful special interests as well as the House S&T and Small Biz committees are pressing to delete this SBIR language from the NDAA. S&T and Small Biz contend that Armed Services lack jurisdiction over SBIR while others contend that SBIR is not germane to the bill. Non-germane amendments to a bill can kill the entire bill. Some House insiders are privately saying SBIR will never stay in the NDAA.

Germaneness is in the eyes of the beholder. How germane to SBIR was the amendment to S.990 (Small Business Additional Temporary Extension Act of 2011) that replaced SBIR with PATRIOT Sunsets Extension Act of 2011, or putting the IRS 1099 statute into last year's health care bill? Of course they repealed the 1099 clause this year because of overwhelming opposition (and lobbying) against it.

As for jurisdiction, more than 50% of the total SBIR program is DoD, and it should be noted that Armed Service Committee leaders in both House & Senate extended the DoD's SBIR program for 1 year in the 2010 NDAA when the House's inept S&T and Small Biz committees struggled for a series of several CRs, extending from 1 month to 3 months. House S&T and small biz not only gave short shrift to the DoD (which forced the Armed Services to act), but to the entire SBIR program.

With the Senate's SBIR language now being included in the NDAA, even BIO has come out in favor! (see http://www.bio.org/media/press-release/bio-praises-senate-passage-sbir-reauthorization ). With BIO on the side of passage, opposition is mainly sour grapes on the part of Graves & Velazquez, and a few on the S&T committee being driven by part of the university community.

The House leadership is likely to Support Graves & Velazquez to try and remove SBIR from the NDAA, and that’s why it is hoped that a letter with many small business signatures will create an environment for the leadership to support SBIR inclusion.

I can't guarantee the letter will work, but it's up to you to try. Senators Landrieu, Snowe, Levin and others did their part. Will you? Will your signature provide the impetus to HASC chair Buck McKeon (R-CA) and ranking member Adam Smith (D-WA) to support the Senate's SBIR language? With a name like Buck, you wouldn't think he'll be shy. Buck has been through this before when in the last congress, as ranking member he saw (then chair) Ike Skelton (D-MO) stand up to his party's leadership to do the right thing for SBIR in the 2010 NDAA (extending DoD SBIR for 1 year). Buck has a much bigger SBIR contingent than did Skelton. Where's NIST?

The release date of on or about November 3 for NIST's SBIR solicitation has come and gone, but we hear that the solicitation is still in the works. Lots of legal issues plague the agencies on SBIR, and it doesn't help that the program is set to expire in a couple of weeks. I believe the NIST solicitation will be released soon. We'll let you know on our SBIR Gateway www.zyn.com/sbir

We write today to express our strong support for the reauthorization of two programs critical to the nation’s small business: the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. As you may know, the most recent short-term extension of the SBIR program is set to expire on December 16th.

We understand there have been many good faith efforts to reach final legislation and appreciate the ongoing negotiations to reconcile the House and Senate bills. However, after 14 consecutive temporary extensions, it is now time to get a long-term reauthorization of these key, job-creating programs that will provide a vital economic stimulus to jump start the commercialization of new products American products and technologies.

To that end, Senators Mary Landrieu and Olympia Snowe filed the Senate SBIR legislation (S. 493) as a bipartisan floor amendment (S. Amdt. 1115) to the National Defense Authorization Act (NDAA) for Fiscal Year 2012 (S. 1867). This amendment, which was accepted by voice vote on the Senate floor, represents the best pathway by which the SBIR and STTR programs can be reauthorized this year.

We, the undersigned companies, strongly support the Landrieu-Snowe language. We therefore urge you to include in the final version of NDAA a workable, long-term reauthorization of the SBIR and STTR programs that closely tracks this language. The Senate’s SBIR Reauthorization bill is supported by both the small business and venture capital communities, including the National Small Business Association, National Federation of Independent Business, the U.S. Chamber of Commerce, the Biotechnology Industry Organization (BIO), and National Venture Capital Association.

We specifically oppose the addition of controversial provisions from the House version of SBIR reauthorization (H.R. 1425). For example, Section 505 of the House bill would eliminate the competitive, merit-based nature of the program by placing an arbitrary cap on the number of awards that can be given to the strongest SBIR participants. This runs counter to the goals and missions of the SBIR program, and would lead government agencies to invest in "second best" technology. We also oppose Section 105 of the House bill, which would eliminate the critical "Phase I" of the SBIR funding process. Since its inception in 1982, the SBIR program has utilized a three-phase process, under which no technology is given significant federal funding before feasibility is proven in an independent, peer-review process. Section 105 of the House bill would compromise this basic protection of the tax payer dollar. Finally, we oppose increasing the participation of firms that are majority-owned by venture capital interests beyond the parameters established in the Senate bill.

The SBIR program was created to increase the participation of small, high technology firms in federal research and development efforts. The program is widely recognized as having met these objectives and encouraged entrepreneurs to innovate and grow the US economy. Since the creation of the program, recipients of SBIR and STTR awards have provided small firms with $28 billion, and these firms have produced more than 85,000 patents, generating millions of well-paying jobs across all 50 states – as well as playing a key role in keeping our nation at the forefront of defense technology and scientific innovation.

In conclusion, we hope you will work with your colleagues this month to achieve final SBIR and STTR legislation that can be signed into law. Sincerely, Closing

Even if the letter fails, your efforts will add strength for additional bargaining power the Senate will have with the House on SBIR. NDAA is not the only issue on the congressional plate, as we have the expiration of the government wide CR on December 16. The House was scheduled to adjourn for the year on December 9, but now they reluctantly decided to move that date up to December 16 but perhaps longer.

As for other SBIR efforts, the House small biz & S&T committees have been insisting on their way or the highway. They also like the idea of 99% / 1%. They want 99% from their bill but are willing to give 1% to the Senate's. Once the SBIR issues settle down, I hope to be able to get back to once a month or so with the SBIR Insider. I regret taking this much of your time.

Friday, December 02, 2011

In previous emails I said I would send information on California small business loan programs. Please find below information from Toni Symonds Chief Consultant for the Assembly Committee on Jobs,Economic Development and the Economy and Kurt Chilcott President and CEO of the Greater San Diego CDC Small Business Finance. Thank you both.

There are several state and federal loan assistance programs. The California Capital Access program is a loss reserve program, which is designed to help businesses that are very close to being credit worthy. Each bank has its own reserve account. When a loan is enrolled in the account, the bank, the business and the state each put is a fee. The lender has access to the full reserve account for any defaults. The state generally puts in double the fee of the lender and the business. Prior to the most recent federal injection of $78+ million, the program only had $4 million new dollars each year. The Treasurer’s Office, who administers the program has been working with the JEDE Small Business Roundtable members to get more banks to participate in the program. Caled and others have been helping to encourage banks to sign-up.

The state also administers a 90% guarantee program, which is backed by a $30 million state managed account. This program also received $78+ million from the feds and is in the process of gearing up. This program best serves businesses that are credit worthy but do not necessarily fit the bank’s optimum profile for such things as years in business. Attached is a joint marketing flyer the Roundtable put together. We also have a very cool chart that talks about each of these programs and types of businesses they target. It has been used in cross training of public and private lenders by the SBDCs this past year. We should probable think about how to use it more broadly. I think it would be good to have a large lender list.

The link to the California Small Business Credit Initiative (pdf) can be found here:

The state’s programs have been very limited. Given the state’s financial situation, the state’s core programs have suffered through annual budget reductions. The federal Small Business Jobs Act, however, have given new life to the two state programs. So they may be worth a second look. I fully agree that there needs to be a secondary market for the state’s guarantee program and we have been talking about how to create more conformity among the loan products. The federal dollars may give us the incentive to jump start this work

Small Banks and Alternative Mission Drive Lenders Providing Greater Access to CapitalCalifornia small businesses should be aware that there are capital resources available to them beyond the large bank and even community bank infrastructures. In fact a recent survey by Biz2Credit found that mission driven lender credit unions, microlenders and other non-profits are providing an increasingly large share of the smaller loans to small businesses. Due to declining sales and profitability, many banks are reducing or eliminating line of credit financing to small businesses. This cots off a vital source of working capital for many small businesses. Both small businesses and banks should be aware of and seek out alternative financing available through a range of alternative lenders. Many new programs have been established to meet these needs. Examples include:

1. SBA has implemented the 504 Debt Refi program available to small businesses who want to refinance the debt on their facilities at terms and maturities typically not available elsewhere: http://www.sba.gov/content/504-loan-refinancing-program

2. SBA has established a new program Community Advantage delivered by non-profit lenders for loans $250,000 and under. http://www.sba.gov/content/advantage-loan-initiatives

3. California has increased the reach of its State Loan Guarantee Program by increasing loan sizes to $1 million. http://buildworksource.com/california-loan-guarantee/

4. California has provided funding for the California Capital Access Program that provides a reserve fund for higher risk loans made by a range of financial institutions – banks and non-profits. http://www.treasurer.ca.gov/cpcfa/calcap.asp

Wednesday, November 30, 2011

Yesterday, Small Business California sent out a press release asking the Governor to hold a meeting with SBA Administrator Karen Mills, the Office of the Comptroller, the FDIC, the Federal Reserve, the California Department of Financial Institutions and bank representatives. See below. Our request has been made through Mike Rossi the Governors Economic Development Czar.

The second piece below from The Hill has SBA Administrator Karen Mills saying that Washington regulations are being interpreted more tightly at the Regional level which is why Small Business California has requested the Governor hold this meeting.

Small Business California Calls on Governor Brown to Convene a Special Meeting ...MarketWatch (press release)

Nationwide, banks have pared their small business loan portfolios by more than $47 billion since the pre-recession peak in 2007. Loans to small businesses are important because small firms play a vital role in the US economy. Firms with fewer than 500 ...See all stories on this topic »

Still a long way to goThe Hill (blog)

Even SBA Administrator Karen Mills said in congressional testimony last month that the guidance coming out of Washington has been interpreted more tightly at the regional level by regulators, thereby slowing small business loans. ...See all stories on this topic »

Tuesday, November 29, 2011

I would like to pass down this booklet from Hank Ryan at Efficiency Data & Development, which can be a very informative resource. The booklet is called, "32 Examples of Businesses Reducing & Eliminating Gasoline Use As They Drive Toward A Better Bottom Line" and it can be found by going to our website or clicking/copying & pasting this link:

http://www.smallbusinesscalifornia.org/Bottom%20Line-%20Updated.pdf

The publication has two objectives. First, it shows examples where businesses have invested in long term improvements that offer a rate of return which increases profit for the business over the long haul. Even a 10 percent rate of return on these improvements is often double or triple what the business returns as a net profit.

Second, these examples and the suggestions from the business owners you’ll read about are meant to show how other businesses can learn from and improve on these smart business improvements. These are not “one off” demonstration projects.

Finally, the focus for these examples is on smaller firms, mainly those with 100 employees or less. While larger companies demonstrate many valuable innovations and their buying power can serve to help develop economies of scale, our focus is on inspiring the millions of smaller firms to use the examples in this publication along with the ingenuity they must bring forward every day to increase their profits. In this way, America’s small businesses will form the foundation of a stronger and more secure economy for everyone.

Monday, November 28, 2011

I received an email from SB Cal board member, Stephen Cornell, regarding changes in California Unemployment tax. Please note the decrease in tax credit from 5.4% to 5.1%. See below for link to article.

Are any of you aware of the lending programs available to California small from the state? In a future email I will talk in more detail about what is available but at this point I am I am trying to judge awareness. Has your banker ever talked to you about these? Suffice it to say there are programs including a loan guarantee which may be helpful to you.

This is a follow up to the question of how California will pay its outstanding $2 plus billion in outstanding federal loans for the Unemployment Insurance fund. The federal government has said to California, you haven't paid your loans back, so we will reduce the amount of credit each employer can take in calculating its obligation for Federal Unemployment Insurance payments (Form 940).

I hope you all had a great Thanksgiving! On November 8th, Biz2Credit released their Small Business Lending Index. They did an analysis of loan approvals for 1,000 loan applications in October and found that small banks approved 46.3% , big banks[institutions with $10 billion plus in assets] 9.2% and alternative lenders[credit unions ,Community Development Financial Institutions, micro lenders and others] 61.5%.

The Index identified the Top 5 reasons why small business borrowers have not been received funding.

1.More than 68% of small businesses reported declining sales in the first 8 months of 2011

2. Profitability has declined at more than 86% of small businesses over the last 2 years.

3.Bank underwriting criteria is stricter now than in 2010 when stimulus money was flowing.

4.Uncertainty among big banks is leading to increased dissatisfaction among small business owners.

5. Avoidance: small business owners believe they are unlikely to get loans and that the process takes too long.

I hope all of you are promoting Small Business Saturday. I hope you are able to use this to promote your business. Please see email from SBA below.

SBA says shopping at small businesses can have a huge impact on local economy

WASHINGTON – As a proud supporter of Small Business Saturday®, a day dedicated to supporting small businesses on one of the busiest shopping weekends of the year, the U.S. Small Business Administration is encouraging every American to support small businesses by doing some of their holiday shopping on the Saturday after Thanksgiving at small businesses.

This year’s Small Business Saturday® is Nov. 26, 2011.

“Small businesses are the foundation of our economy – half of America’s workers either own or work for a small business,” said SBA Administrator Karen Mills. “Small Business Saturday® is an opportunity to show our support for our friends and neighbors who throughout the year are growing our local economy, as well as supporting many local initiative and organizations.”

Nov. 26 marks the second annual Small Business Saturday®, a day to support the local small businesses that create jobs, boost the economy and preserve neighborhoods around the country. First there was Black Friday, and then Cyber Monday, and now Small Business Saturday® will help drive shoppers to America’s job creators. Small businesses have generated two out of every three net new jobs over the past 15 years and employ over half of all private sector employees.

For more information on how to support Small Business Saturday® in your area, or to get great Small Business Saturday® marketing tips and resources, check out www.sba.gov/saturday or visit Facebook.com/smallbusinesssaturday and follow us on Twitter @SBAgov, #SmallBizSat.

###

Best,

Chris Chan Special Advisor for Public EngagementOffice of Communication and Public LiaisonSmall Business Administration (SBA)

Yesterday, I was contacted by a Financial Staff Writer at the LA Times. He indicated that he had been contacted by some small business owners indicating that one major bank was imposing maturity dates on longstanding lines of credit that had never had them before. He indicated that they did have high balances on the LOCs, but had never missed a payment and the demands for full repayment had created some real problems for these businesses. Interestingly enough, I have also been contacted by small business owners on this same issue and the same bank.Have any of you had problems like this with your bank? Who is the bank?

On November 30th, I will be testifying before the Senate Select Committee on Restoring the Middle Class. I would be interested in your thoughts on what role small business plays on this issue given that we employ almost half of the people in the private sector.

Friday, November 18, 2011

Small Business California is working on having the Governor call a meeting with Karen Mills, the SBA Administrator, the FDIC, the Federal Reserve and State bank regulators. The purpose of the meeting would be to have the regulators in the same room with the Governor and Ms. Mills to discuss small business lending. When we talk to bankers they tell us they are caught in the middle. They are being told to give loans to small businesses and then when they do, they get slapped on the wrist by the regulators. Yesterday, I talked to a reporter interested in this and he told me that he had discussed the concept with a bankers association and they were very supportive of this. We also have a request made to Mike Rossi, the Economic Development Czar for the Governor.

Recently, it was announced that Walgreens and Anthem were severing their relationship. For those of you with health insurance through Anthem [Blue Cross] how will this affect you and your employees?

Rick Schindel advised that the SBIR program has been extended to December 16th. As an aside in his newsletter, he alluded to a comment by Erskine Bowles. The comment has nothing to do with SBIRs but you may find it amusing. Mr. Bowles says:

“What we are doing doesn’t make common sense. We have a treaty with Taiwan; we’ll protect Taiwan if they are invaded by the Chinese. There’s only one problem with that, we got to borrow the money from the Chinese to do it. It’s crazy”

Thursday, November 17, 2011

Please see below statement by Winslow Sargeant on 3% withholding. Note it is being repealed. Thank you Winslow and Advocacy's help on this.

I will be going to Santa Monica this week to meet with the CEO of the Entertainment Industry Foundation along with Amy Hamlin, the ED of Volunteers in Medicine. The Entertainment Foundation has been the fastest growing Foundation over the last couple of years growing over 400%. You may have seen their work in the Stand Up2 Cancer campaign where they raised $100 million.

We are looking to get funding from them and see if we can get a National spokesperson. We have put together some numbers for Volunteers In Medicine which are truly amazing.Over the last 12 years we have spent $3.5 million and developed 85 clinics that have raised $175 million. That is an ROI of $50 to $1. In 2010 our clinics spent $25 million and had 350,000 patient visits. That is less than $80 per patient visit. Compare that to the cost of an emergency room visit. We estimate that our clinics have saved $62 million for community hospitals. Our goal is to develop 250 clinics by 2016

Chief Counsel Praises the Repeal of Three Percent Withholding Requirement on Contractors

Washington, D.C. – Today Chief Counsel for Advocacy Dr. Winslow Sargeant praised Congress’ repeal of the three percent contractor withholding requirement. The requirement would have required federal, state and local governments to withhold three percent of nearly all payments made to contractors, placing a burden on numerous small businesses. By a vote of 95 to 0, the Senate passed the Government Contractor Withholding Repeal Act. The House has already passed a similar piece of legislation. The Office of Advocacy has consistently worked with small businesses for the elimination of this unfair burden. The Chief Counsel called for its elimination in May of this year.

“The repeal of the three percent withholding requirement is a victory for small business,” said Dr. Sargeant. “For small businesses to thrive in government contracting they need an environment that is clear, transparent and predictable.”

The three percent withholding requirement would have adversely affected the accounts all small businesses that provide services to government entities. Most of the small businesses would have had to increase their debt level in order to ensure sufficient cash flows and thus pass these additional expenses on to their government customers. If small firms were unable to secure additional debt, the three percent withholding requirement might force them out of the Federal contracting market.

The three percent provision was included in the Tax Increase Prevention and Reconciliation Act of 2005 in an effort to ensure that individuals and companies that receive new payments from the federal government did not accrue tax debt. The law mandated that federal state and local governments with expenditures of more than $100 million withhold three percent of payments for products and services worth more than $10,000. The requirement was scheduled to take effect on January 1, 2013.

The Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. The presidentially appointed Chief Counsel for Advocacy advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policymakers. Regional advocates and an office in Washington, D.C., support the Chief Counsel’s efforts. For more information, visit http://www.sba.gov/advocacy, or call (202) 205-6533.

Monday, November 14, 2011

Please see below for the announcement that President Obama’s health care law will be heard by the Supreme Court with a ruling in July. As you know, this has been going through the lower courts with mixed decisions.

The Small Business Innovative Research program will be running out of money November 18, 2011.It appears that the program will be part of a Continuing Resolution to keep much of the government open until Dec 16, 2011. It also appears that there might be a breakthrough in finding a compromise between the House and the Senate in getting an appropriation beyond the Dec 16th timeline.

I just got word that Fred Patterson[aka The SBIR Coach] has recently been diagnosed with Stage IV-a “locally advance oropharyngeal cancer.” Fred indicates he has been told the survival rate on this cancer is 37%. Most of you don’t know Fred, but he has been a tireless advocate for the SBIR program. All our prayers are with him. You can reach Fred at fredsjourney@gmail.com

Please drop him a note and tell him the small business community around the country is there for him.

Wednesday, November 09, 2011

Some of you may not be aware that CAL Insurance provides personal automobile insurance and homeowners insurance. In fact, we currently have more than 2,000 automobile and homeowner clients. We are always looking for opportunities to provide the best coverage at the lowest price and I am very excited to tell you that we are now an authorized agent of Hartford to offer AARP automobile insurance through the AARP Auto Insurance Program.

Until now, this insurance was only available by dealing directly with Hartford. If you are a member of AARP, we think that you can reap huge benefits in having CAL represent you. We can explain the coverage and help you in the event of a claim like we do on your commercial insurance. We can also compare AARP prices and coverage with other insurance companies that we represent.

If you are a member of AARP, give Eddie Sandoval a call. You can reach by phone at (415) 680-2112 or by email at esandoval@cal-insure.com

CAL Insurance is there for you for all your insurance needs. You can also get more information by going on our website at: http://www.cal-insure.com/#

Friday, November 04, 2011

As I think most of you know, the California legislators considered a bill to allow for rate regulation by the Insurance Commissioner and the Department of Managed Care[ AB51]. Small Business California did not take a position on this and it has not passed.

In Maine, which allows the state to regulate rates Anthem, is suing the state for rejecting their rate filings. The state said that the insurance company could make a profit of 0% in 2009,.5% in 2010 and 1% this year. Anthem is basing their lawsuit on the theory that the state cannot regulate to the point of not allowing a company to make a fair rate of return on their investment.

What do you think about this? It should be noted that states can regulate rates in 26 states and there has been legislation to allow state regulation in 7 other states including California.

On Thursday, November 3rd at 5:00 p.m. EDT, please join Administrator Mills from the Small business Administration and Jon Carson, Director of the Office of Public Engagement, for a conference call about the American Jobs Act and its benefits for small businesses in your communities.

We ask that you share this invitation with your networks and affiliates.

We just received a response to our letter to Administrator Karen Mills at the SBA (click image below to enlarge). There were 14 California Small Business Associations that signed on to this letter, along with Small Business California. The good news is that Regional Administrator Elizabeth Echols has been designated as the point person for SBA. She will lead the efforts to help small businesses in California to find ways to reduce their energy use and reduce their energy cost.

You will see in the letter that we will be working on getting out more information about the President’s Better Building Initiative, promoting On Bill Financing with PG&E and Southern California Edison, and expanding On Bill Financing with San Diego Gas. We will also try to find ways to work with public utilities.

Do you have any ideas of additional things Small Business California and SBA can do to help small businesses in this area?

Friday, October 28, 2011

Yesterday, the House voted 405 to 16 to repeal legislation (passed in 2005) to impose a 3% withholding tax on government contracts. The original bill has been delay until 2012 and has not been implemented.This is great news for small businesses! Small Business California has been very vocal in supporting the repeal. It appears that this has bipartisan support so we are hopeful it will be passed in the Senate. We will let you know when it goes to the Senate.

Yesterday, I received a call from a reporter asking about collection of receivables for small businesses, given the downturn in the economy. He told me two surveys have been done one saying time for collection is 23 days and another being 36 days.

What has been your experience? Have you seen an increase in the time to collect receivables? Are you writing off receivables? Is the delay in collecting receivables creating cash flow problems for you?

I am always looking for issues affecting small business. If you have an issue that is broad based and affects small businesses that have not been brought up in a previous email from me I would like to know. Please make the subject of the issue state based as I cannot deal with local issues.

I hope you find these emails beneficial and if you are not a member, I hope you will consider joining Small Business California. You can do so by going to our website www.smallbusinesscalifornia.org

Wednesday, October 26, 2011

AARP is one of the most powerful lobbying groups in Washington and to a lesser degree Sacramento. There are about 3.2 million members in California alone. Traditionally, small business organizations have not worked with AARP but my question to you is should Small Business California reach out to AARP?

You may not be aware that many of the start up businesses being created are by people 50 and over. It also seems like small businesses would be interested in tapping into a work force of people 50 and over where many of which need or want to work after retiring. What are your thoughts? Are there other issues we can work together on? Are you a member of AARP?

On Oct 13th, Senator Bernie Sander [Vermont] chaired a hearing on how utilities can help customers use savings on their monthly energy bills to finance energy efficiency improvements at homes and businesses. If this sounds familiar, it is exactly what Small Business California has brought to California with its On Bill Financing program.

Senator Sanders was quoted as saying “When you have a program that cuts energy bills and makes small businesses more competitive, creates jobs and slashes greenhouse gas emissions, that is a win-win-win, and Congress should support these efforts”

Small Business California has asked Mike Rossi, the Energy Czar for the Governor to help us expand On Bill financing in California. Small Business California and 14 other small business associations in California have written a letter to SBA Administrator asking the SBA to assist in these efforts. The SBA is required to do this under the 2007 Energy Bill passed by Congress and signed by the President. In California, San Diego Gas & Electric has done a great job in implementing On Bill Financing. PG&E and Southern California Edison quite frankly have dragged their feet.

On Oct 25th, Victor Parker was sworn in to be the SBA District Director of LA, Ventura and Santa Barbara Counties. Mark Quinn, District Director in SF, has been shuttling between SF and LA filling in as acting District Director for the last few months. Does anyone know Victor? Small Business California looks forward to working with him.

Wednesday, October 19, 2011

The email below is about the Small Business Innovative Research Program. Small Business California and the National Small Business Association have been strong supporters. I know most of you are not involved in SBIR, but I think the email from Rick Shindell (SBIR Gateway)gives you a good understanding of the politics in Washington and politics in general, in respect to small business.

The SBIR has been a very successful program and has shown support on both sides of the aisle and yet, it has been operating on continuing resolutions for years because of partisan bickering. I hesitated sending such a long email, but I think small businesses need to know political realities.

I am pleased to say we have over 100 people confirmed for the Travelers/Small Business California Symposia Oct 20th. I look forward to seeing all those that are attending. I also want to thank all of you that completed the survey. If you would like a copy of the results please let me know.

In order to tell you what is going on with SBIR reauthorization, we must discuss the politics, this time, not for political junkies only. If you can suffer through the political portion, you'll have an increased understanding of the SBIR reauthorization problems, and how we can deal with them.

SBIR reauthorization is NOT a partisan issue, both parties tend to like the program, BUT they like (and need) money more. The excesses of campaign and party finances have brought about the degradation of our political system thereby diminishing the "well being" of our country and its citizens. Amongst other things, this has lead to the lowest approval rating of Congress in our history. It's possible now they will be more amenable to listening to you rather than dollars.

Perhaps we should look at ourselves as part of the cause. The simple fact is that the candidate with the most money in their election coffers, win 94% of the time. Sure we hear about the 6% because it is remarkable but all too rare.

Due to this 94% fact, both parties require their candidates to raise money not just for themselves, but for their party, so the party can put more financial support into candidates in tougher races, thereby trying to achieve a majority in congress. Small businesses get a lot of "chin music" from congress, but at the core, (and behind closed doors) small businesses are not considered a good fund raising resource, so more attention goes to the larger, better funded concerns. This is especially true in the House with its 435 members.

Jurisdiction for legislation is related to a committee's mission, i.e., Armed Services, Small Business, Finance, Science, etc. The power is in the hands of the committee chairs and ranking members. More often than not, committee members fall into line with what their chair/ranking member wants. Then when the bill is brought out of committee to the whole House, the parties usually follow the lead of the their committee chair or ranking member. Rock & Roll: That's what was so remarkable when the House democrats rolled (voted against) their ranking member of the Small Business Committee, Nydia Velazquez (D-NY) last May to pass the SBIR continuing resolution (CR) to keep the program going through September 30, 2011. That didn't happen by accident, it was the flood of calls that many representatives received from their constituents (you) urging them to pass the CR.

Exception to the Rule: The House Small Business Committee had it's chairs and ranking members in the back pocket of BIO and NVCA ever since former chair Donald Manzullo (R-IL) left in late 2006. On several occasions (including in the Congressional Record) Manzullo discussed the heavy lobbying and pressure tactics of those groups, (wanting to allow a small business to be majority owned and controlled by non-small business). Manzullo wouldn't cave to their pressure, and throughout his tenure as chair of the committee, Inc magazine rated him as one of the best friends to small business (for a variety of excellent reasons). The total opposite is true for both Sam Graves (R-MO) the current chair, and Nydia Velazquez the ranking member and former chair. Both Graves and Velazquez have been fighting to give BIO, NVCA and some others, everything they want, and more. That's been the biggest sticking point in SBIR reauthorization.

If we look at the 2010 lobbying dollars for BIO and NVCA (as reported by The Center for Responsive Politics) we see the following lobbying contributions: Biotechnology Industry Organization: $8,440,000 National Venture Capital Association: $2,567,515

You're not going to see those kinds of dollars coming from the small business community. For his personal election efforts, Mr. Graves hasn't had a serious election challenge since 2000. In 2010 he raised over $1M (73% from PACs) and his opponent could raise only $16K. Graves got 69% of the vote!

Velazquez also raises a lot of money but runs virtually unopposed every time. Why does she need the extra money? According to numbers provided in Marian Currinder’s book "Money in the House", a democrat who receives a leadership position on a lower level committee (such as small biz) must contribute $150,000 in dues to the Democratic Congressional Campaign Committee (DCCC) and raise an additional $100,000.

The republicans aren't much different, so Graves must contribute a lot of money to his brethren as well. Neither Graves nor Velazquez can get the money they need from small businesses, but it's a piece of cake for the big boys, just give them what they want. The Senate: The Senate Committee on Small Business & Entrepreneurship (SBE) led by Mary Landrieu (D-LA) chair, and Olympia Snowe (R-ME) ranking member, worked tirelessly with their staff, small businesses, industry trade groups, state & local governments, and other stakeholders to strike a reasonable compromise bill that could be supported by the SBIR stakeholders. They accomplished this in their bill S.493 The SBIR/STTR Reauthorization Act of 2011. This bill also included many of the provisions (or compromises thereto) that were championed by the House Small Business Committee, including a generous amount for VCs. The SBE's compromises were so carefully worked out in S.493, that it led to letters of enthusiastic support for passage of the bill by the Biotech Industry Organization (BIO), National Venture Capital Association (NVCA), Small Business Technology Council, and many others.

In a March 7, 2011 letter of support to Senators Landrieu and Snowe, BIO president and CEO James Greenwood stated:

"On behalf of the Biotechnology Industry Organization (BIO) and our more than 1,100 biotechnology companies, academic institutions, state biotechnology centers and related organizations, I am writing in support of S. 493, legislation to reauthorize the Small Business Innovation Research (SBIR) and Small Business Technology Transfer Program (STTR) programs. This bill represents a balanced approach to ensure that America’s most innovative small businesses can access existing incentives to grow jobs by commercializing new discoveries."

On March 8, 2011, NVCA president Mark Heesen also wrote a letter of support to Landrieu and Snowe:

"On behalf of the National Venture Capital Association (NVCA) and its members, I am writing in support of Senate passage of S. 493, the SBIR/STTR Reauthorization Act of 2011, which reauthorizes the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. This legislation represents a fair compromise to ensure that America's most innovative small businesses can once again have access to existing government incentives to grow jobs by commercializing new discoveries."

Unfortunately the Senate was not able to invoke cloture on S.493, largely because it was brought to the Senate under an open rule which allowed about 200 amendments to be offered to the bill, almost all of which were not related to SBIR. So the bill just sits idle in the Senate, but its language is available for future use.

In the House:, Two committees have oversight of the SBIR program, the House Committee on Science Space & Technology (HSS&T) and the House Committee on Small Business (HSB). The HSB generally takes the lead unless there is an issue dealing with the universities (we'll discuss later).

H.R. 1425, Creating Jobs Through Small Business Innovation Act of 2011, was reported out of the HSS&T and HSB in mid-May of 2011. It has yet to reach the House floor. Seeing the Senate's compromise on the VC issue (supported by BIO and NVCA), the HSB decided to double the amounts for the VCs, and add Hedge Funds and Private Equity Investment Organizations to the list of entities that could have majority ownership of a small business and still compete for SBIR funding. This added support from their Wall Street benefactors. Of course, BIO and NVCA were more than happy to support the House bill that gave them more than they dreamed of!

Disingenuous Dear Colleague ???: HSB Chair Sam Graves sent a "Dear Colleague" to House members on September 15, 2011 that at best could be termed "misleading." Let's examine: Mr. Graves states: "First, let us say that it is our full intention as the Chairmen of the House Small Business and Science, Space, and Technology Committees to negotiate a long-term reauthorization of the SBIR program."

Challenge: Graves mentions "long-term reauthorization". SBIR has always been reauthorized in 8 year chunks. Last year Graves supported only a 2 year reauthorization, this year he proposes 3 years. The Senate is supporting the customary 8 years, but Grave's sticks to 3. Is that "long term?" It should be noted that work on SBIR reauthorization began in 2005 in anticipation of a 2008 expiration.

Mr. Graves states: "We have been diligently working with members on both sides of the aisle and on both sides of the Capitol to put together a long-term reauthorization that improves and modernizes the SBIR program and provides certainty to the thousands of small businesses that utilize the program."

Challenge: "Both sides of the Capitol?" Nonsense. Check with the Senate Committee on Small Business & Entrepreneurship (SBE) on this. HSB posture has been their way or the highway. Mr. Graves states: "We remain committed to reaching a deal on a SBIR reauthorization and will continue our discussions with the Senate to reach a deal."

Challenge: This gives House members the impression that details are being worked out when in fact, they aren't. Grave's worry is that you may try to do to him as you did to Ms. Velazquez, getting the party to "roll" (vote against) their ranking member or chairman . This saved the SBIR program back in May.

The main thing that saved the SBIR program in the last CR back in May, was your involvement, speaking up, working with your congressmen, telling them what was reasonable and proper, and what you expected from them. Many of you did this independently, or working with groups such as SBTC, SBBC, and/or some state organizations formed by small high tech businesses. The Heroes Step Forward: Remember our previous statement concerning committee jurisdiction. In keeping with that, on October 11, 2011 Congressman Edward Markey (D-MA) along with 24 other representatives sent a letter to HBC chair Sam Graves & ranking member Nydia Velazquez about SBIR reauthorization issues.

They voice concern about the VC language in H.R.1425 and suggest borrowing from the Senate's S.493 language: "…therefore urge you to include language on VC participation similar to that of S. 493, which is supported by both the small business and venture capital communities. Also, integral to a limited increase in VC access is an increase in the total allocation for the SBIR program from its current 2.5 percent level to 3.5 percent, which also has support from a broad coalition of business groups, including the Small Business Technology Council, the U.S. Chamber, and National Federation of Independent Businesses."

"Second, we are concerned about section 505 of H.R. 1425, which would limit the number of SBIR awards and dollars individual companies can receive, and in doing so would seriously undermine the merit-based principles that make the SBIR program so successful."

They also voice concern and opposition to "direct to Phase II" (bypassing phase I) and they urge a long term reauthorization, as has been the case for almost 28 years. A complete copy of the letter can be seen at: www.zyn.com/sbir/insider/markey2.pdf

Another "Potential" Hero? In a written response to one of his small business SBIR constituents who voiced concern over the VC issue in House bill, Speaker of the House John Boehner (R-OH) stated: "I am concerned that the bill goes too far in relaxing constraints on venture capital ownership of firms receiving SBIR and STTR funds which could lead to the subsidization of venture capitalist firms with taxpayer dollars. Rest assured, I will keep your thoughts in mind as H.R. 1425 moves through the legislative process."

Speaker Boehner may well remember that a former speaker of the House, Tom Foley was voted out of office by his Washington State constituents, many of which thought he gave more attention to his lobbyist backers than his constituents. Also, Boehner saw his good friend and neighbor Steve Chabot (R-OH) get voted out of the house in 2008 for similar reasons (Chabot is now back in as of the 2010 election).

The University Backlash: The university groups historically disliked and often tried to reject/abolish the SBIR program. In fact, it was the university community along with the NIH that were able to remove/exempt SBIR (in the dead of night) from any inclusion in recovery act (ARRA) funding.

The HSS&T totally rejected the Senate's idea of increasing the SBIR allocation from 2.5% to 3.5% over 10 years. Any SBIR increase was historically fought against by the university community), and the HSB was more than happy to accommodate them. This put the universities solid support in the corner of the House's H.R. 1425 SBIR bill, which made no increase in the SBIR allocation, but removed significant portions of SBIR dollars from small businesses to channel those dollars to Wall Street and university programs.

Most people don't realize the enormity of university lobbying. Just as we discussed the power of organizations such as BIO and NVCA, we must include the university sector and non-profits in the group of power brokers, such as:

Of course the prim and proper atmosphere of the universities made them the ideal group to disparage the success of the SBIR program (even though they were often a beneficiary of SBIR/STTR success). It wasn't personal, but they believe that the agencies' extramural R&D budgets (especially NIH) belonged to them, and any deviation of those funds would result in cures and treatments not being funded or discovered. It is like small R&D businesses are merely chopped liver trying to suck blood money out of critical university research.

In fact, some in the university sector delighted in citing SBIR "waste, fraud & abuse" (WFA) as an example of a poor government investment. Indeed there is some and it should, and will be dealt with. However, it has yet to be demonstrated that SBIR has as much or more WFA than other government programs and participants, including universities!

Excuse me, I've been told that universities don't have WFA, but merely an occasional wayward professor. Other times it is simply a matter of "Research Misconduct."

I suppose it was a simple case of research misconduct when EPA reported (in their publication "When Good Money Goes Bad"): A university in New England agreed to pay $2.5 million in damages and penalties to settle civil allegations that the university submitted false claims on approximately 500 federal grants awarded to them. Let's be honest, intentional WFA is a product of the dark side of the human animal, and it's present in all environments. We should work together to minimize it, as well as reduce unintentional occurrences of WFA.

Support the National SBIR Fall 2011 Conference, Nov 6-9, 2011 * New Orleans, LA Most of the National SBIR conferences are there to support you in your SBIR/STTR ventures, and this is also true of the New Orleans conference. However, this is also an excellent chance for us to show our support for the program.

There are some very good sessions planned, and the agenda is now posted on their web site at www.sbirla.org Early registration discounts are available through October 26, and special hotel per diem rates may still be available, but on a limited basis, so lock in your room quickly.

Complete information about the conference is available on their web site at www.sbirla.org I hope to see you there.

Friday, October 14, 2011

This has been a big issue for small businesses, not only in California, but around the United States.During a White House Conference in 1995, this issue rose to the top and put forth to the President by small businesses around the country. Misclassification can mean thousands of dollars in fines and penalties by the IRS and EDD. IRS and EDD are stepping up their audits of small businesses looking for these misclassifications. The problem is IRS and EDD have somewhat different definitions. The IRS has a 20 point test, but does not tell businesses how many of the points in the test you must comply with.

Have you been audited by IRS or EDD? Do you know what some of the rules are to establish Independent Contractor status? Small Business California is considering introducing legislation next session to clarify what the Independent Contractor rules are in California. What are your thoughts on this? If you would like to see the IRS 20 point test, please see the link below:

Speaking of legislation Small Business California is looking at putting together its package of bills for next year. We have legislators that have come to us asking for ideas on small business legislation they can carry. Do you have any ideas?

On Sunday the Governor signed Assembly Bill 361 [Huffman]. Small Business California was a strong supporter of this bill and worked closely with Assemblyman Huffman’s office in getting this passed and signed by the Governor. The bill creates a new, fully voluntary class of corporation called a benefit corporation. This allows businesses to pursue a material positive impact on the environment and community in addition to maximizing profits. Assemblyman Huffman says “we have a law that send a strong message to entrepreneurs that California is open for this emerging form of business.

Under AB361 businesses can choose to incorporate as benefit corporations and enjoy the following: 1. Greater access to social impact and venture capital investments2. Legal protection for directors and officers in the more broadly defined fiduciary roles of maximizing profits as well as ensuring social and environmental considerations3. Marketing opportunities because of their social responsibility.

In an unusual twist, “payback” is the buzzword this fall as millions of Californians prepare to make health plan choices for 2012. Kaiser Permanente is rolling back rates by 1.2 percent for small employers with contracts up for renewal between July and December 2011 — and is giving premium credits totaling $13.7 million to those who already started paying higher rates that took effect July 1. The first credits will show up on November bills.

The move is a response to pressure from state regulators with new authority to examine rate hikes more thoroughly than they have in the past. Blue Shield of California is passing out premium credits, too, but for a different reason. The health plan announced in June intentions to give back $167 million to employers, part of a move to reduce profits for 2010 to 2 percent. Most affected customers will see a credit on their October bill. How the changes will affect employee health benefit choices is unclear, but brokers like carrying a positive message for a change.

While some employers renew coverage at other times of the year, many hold annual “open enrollment” in the fall, including the giant California Public Employees Retirement System . Open enrollment for CalPERS members is Oct. 10 through Nov. 4. The two plans say it’s a coincidence that the paybacks are playing out now, and they have no relation to open enrollment.But it’s not bad to look good at this time of year. Open enrollment is so competitive that plans crank up advertising to strut their stuff to the public. Done for different reasons, the net effect of these actions by Kaiser and Blue Shield is a little break for some small employers.

“It’s a credit on premium or you get to pay less money going forward,” said Vinny Catalano, area vice president at Arthur J. Gallagher & Co.

The bottom line for small businesses who want to provide health insurance is they are being priced out of the market,” said Scott Hauge, president of Small Business California and owner of an agency called Cal Insurance. Hauge’s company is getting a premium credit from Kaiser.

“What this is, is a credit on the increase,” Hauge said. “Only in insurance!”

Rollback at Kaiser

Almost 12,900 local Kaiser subscribers and an unknown number of their dependents will be affected by the rollback. Kaiser began notifying them of the change in mid-September. The company didn’t reach agreement with the California Department of Managed Health Care on the rates until August.Roughly 190,000 subscribers to health maintenance organizations and 240 point-of-service subscribers and an unknown number of dependents will be affected statewide.

The approximate value of the rate cut is $13.3 million for the HMO; it’s $40,800 for the other plan. HMO subscribers will get about $70 each and POS subscribers, $170 each, according to Kaiser spokesman John Nelson. The rollback saga began in April, when Kaiser filed a proposal to hike HMO rates for small employers by 10.7 percent, effective July 1. The POS rate hike was 12 percent, effective the same day.

A new law — Senate Bill 1163, approved last year and enacted Jan. 1 — requires health plans to file specific information with state regulators at least 60 days before they take effect.The problem for Kaiser is the law requires a rate evaluation by categories that include inpatient, outpatient, physician and other expenses. An integrated health system and health plan, Kaiser doesn’t track data like that.

DMHC officials asked for more information, which Kaiser supplied in June. Regulators balked at what appeared to be a 7.2 percent projected margin for Kaiser on the HMO business. Kaiser says the number falls to 0.6 percent when they subtract money spent on community benefits and the cost shift from un-reimbursed services provided under Medicare.

“That raised a lot of questions back and forth. It was clear we needed to do more to help the department understand our rate system and how and why we are different,” Nelson said.

That took time. Meanwhile, the proposed rates took effect July 1. In recognition that it’s going to take more time to resolve the issue, Kaiser agreed to a one-time rate cut of 1.2 percent, to an average of 9.5 percent for the HMO subscribers and an average of 10.8 percent for the POS subscribers. Employers who already began paying higher rates will get premium credits. The first will appear on November bills, but some won’t show up until December, Nelson said.

“What’s driving this is a new regulatory process and our commitment to work with the department,” Nelson said. “It’s a reduction in the rate increase — but there is still a rate increase.”

DMHC was able to get Kaiser to roll back rates using existing law, department spokeswoman Lynne Randolph said.

“DMHC requested Kaiser reduce its rates after reviewing the lack of data they provided to support its trends and Kaiser agreed,” she said in a prepared statement. “As a result, thousands of small businesses will benefit. In this economy, we must do all we can to help save money for these employers, many of whom are struggling to maintain health coverage for their workers.”

Profit return at Blue Shield

Blue Shield is passing out credits, not reducing rates, but the net effect is a little more money in employer and employee pockets. The plan’s decision is a voluntary move to make health care more affordable; it does not come in response to action by state regulators. The health plan is returning a total of $6.9 million to 2,049 businesses in the Sacramento region in a form of premium credits this month. The average amount is $3,300. Another $1.3 million will go to individual health plan members in the region, with an average premium credit of $90.

The payback is part of a pledge by Blue Shield to cap its profit margin at 2 percent of revenue and return any additional income to customers, health care providers and nonprofit organizations that provide health care to low-income Californians. The amount is based on premiums in May 2011; October bills reflect the credit, which is about 30 percent of one month’s premium. People who have dropped Blue Shield coverage lose out, however. The money is only paid out as a credit, company spokesman Steve Shivinsky said.

“We were very careful not to call it a rebate, but a credit, so people won’t think it’s cash,” he said. “Imagine logistically, if we sent checks.”

Owen Arnoff, whose company merged with Incompass Tax, Estate & Business Solutions in North Highlands and switched coverage to a new health plan, is miffed.

“I don’t understand why that would be, if I paid the annual premium like everybody else,” he said. “It’s like you have to stay with us in order to get whatever they call it. Are they really giving back? Not across the board.”

It’s not an inducement to renew, Shivinsky said. The credits were announced in June and the process took a while. Arnoff is not the only person who dropped the policy over the summer and won’t get a credit, though.

“It’s thousands and thousands of credits worth millions and millions of dollars,” Shivinsky said. “It’s not easy to give back money.”

Monday, October 10, 2011

On Friday, Governor Brown signed Small Business California sponsored legislation SB 826[Leno]. This would place minimal fines on claims administrators who fail to report or provide inaccurate information to the Workers Compensation Information System. This is important because workers compensation policy is developed by information provided the WCIS. Initially, this bill was opposed by the California Chamber, California Manufacturers, the Joint Underwriting Association and the Coalition of Workers Compensation. We were able to eliminate their opposition, except for the Joint Powers Association. But, we were able to get the support of claims administrators.

Yesterday was the last day for the Governor to sign or veto bills. We are waiting to find out what happened on Sunday but we do know that SB 459[Corbett] was signed by the Governor. This bill will increase fines on employers who willfully and knowingly misclassify independent contractors. Small Business California applauds going after the underground economy because this is a big issue for small business, but we would like to see the state clarify the definition of independent contractors. EDD and IRS do not have the same definition and we think this should be clarified.

As you all know, the IRS established a 20 points list which helps to define an independent contractor (link below), but they do not say how many points must be followed to establish independent contractor status.

Another supported bill we are watching closely is SB 469 [Vargus]. This bill will require super-stores over 90,000 square feet to do an economic study of the impacts to the community, including small businesses. We should hear the Governors position today.October 20th is quickly approaching and if you haven’t done so already, please take the survey (link below).

http://travelers.qualtrics.com/SE/?SID=SV_eFkQd5KoG1Udv3S

Also, if you are in the Bay Area I hope you will attend the symposia at the Julia Morgan Ballroom in SF. (registration link below):

This event is being co-hosted by Travelers and Small Business California. We have added a section talking about big business working with small business and are pleased to have John Legnitto, from Recology, talking about what they are doing to help small businesses. Please take the survey and register now for this free event. We will also validate parking.

About Me

Small Business California is a proactive, non-partisan business advocate whose only agenda is the well being of California’s 3.2 million small businesses. Working for all small businesses for a better business environment, SB-Cal is responsive to the needs of small business owners.
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